STV sells Pearl & Dean for £1

STV, Scotland's ITV licensee, has sold cinema advertising business Pearl & Dean for a nominal sum of £1.

The broadcaster had been desperately seeking to sell-off the business, which has been bound by a loss-making contract with the Vue chain, because it has been a considerable drag on the company's financial performance.

STV said that Pearl & Dean has been making losses of £10m to £12m a year due to the five-year fixed contract with Vue, which was struck in 2004 and terminates at the end of this year.

"It has been a heavily loss-making business which is why we haven't been able to sell it until the end of the Vue contract was in sight," said the STV chief executive, Rob Woodward. "The outlook going forward [2011 and beyond] is extremely positive now we will not be carrying these losses forward."

The Scottish broadcaster has agreed to sell the operation to a new company, Image Limited, backed by Thomas Anderson, a director and ultimate owner of Empire Cinemas.

Pearl & Dean's deal with Vue comes to an end this year. Under the deal the 2010 minimum income guarantee payable to Vue for 2010, £17.6m, has been paid through an intercompany loan from STV. As part of the deal with Image £9.1m of the loan will be repaid to STV from 1 May to 31 December. The first £2.5m will be paid on completion of the deal, with the remainder to be paid in monthly instalments.

STV said that the overall the sale of Pearl & Dean is expected to be "broadly neutral" for STV in terms of the expected impact on company earnings in the current financial year.

"Completion of this disposal will enable STV to continue to focus on creating shareholder value through the delivery of our growth strategy," said Woodward.

• To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000.

• If you are writing a comment for publication, please mark clearly "for publication".